Agenda and Notes - November 8, 2018

State College Area School District

OUR MISSION:  To prepare students for lifelong success through excellence in education.

November 8, 2018, Board Finance and Audit Committee Meeting

11:45 a.m. - Meeting Room A, Panorama Village Building

240 Villa Crest Drive

State College, PA  16801

 

Agenda

 

       I.   Call to Order

 

      II.   Fiscal Year 2017-2018 Financial Statements - Draft (attachment)

 

     III.   Capital Expenses/Financing (attachment)

 

     IV.    Budget Development 2019-2020 process - discussion

 

      V.    Amazon Business Account

 

     VI.    Future Meeting Agenda Items

    • Budget Development 2019-2020
    • Board Dashboard for Finance
    • Contracts/Purchases Policy

     

    VII.   Public Comment

 

   VIII.   Adjournment


Board Finance and Audit Committee Meeting Notes
November 8, 2018 11:30 a.m. - Meeting Room A             Accepted Notes
Panorama Village Administrative Center
240 Villa Crest Drive
State College, PA  16801

Present:  Amber Concepcion, Dan Duffy, Scott Fozard, Laurel Zydney
Others:  Randy Brown, Robert O’Donnell, Nancy Reese, Chris Rosenblum, Nicole Steele, Donna Watson, Nick Zepp
Baker Tilly Representatives:  Rick Bair, John Taylor

A copy of  all materials distributed to the committee members for discussion are included with the official minutes, unless otherwise indicated.

I.        Call to order
Mr. Fozard called the meeting to order at 11:47 a.m. and turned the meeting over to Mr. Brown and Ms. Watson to lead the review of the 2017-18 Financial Statements.

II.       Fiscal year 2017-2018 Financial Statements
Mr. Brown pointed out that in the audited report you will see comments regarding IT Security which is new this year, notes recorded below.  Ms. Watson introduced the Baker Tilly representatives, Rick Bair and John Taylor. Mr. Bair introduced himself and turned the review of the Financial Audit Statements over to Mr. Taylor.  Mr. Taylor stated the audit was as of June 30, 2018 and completed with no audit adjustments made, the audit was clean and timely, with no disagreements with management. The only change in reporting was the Governmental Accounting Standards Board (GASB) requirements in relation to the pension liability.  

Highlights that were discussed:

  • Page 2:  Clean opinion on the financial statements,GASB requirements, supplementary information.
  • Pages 6-8:  Comparative information and a suggested future reporting side by side; current assets up $58 million from prior year end, noncurrent assets increased by $51 million over prior year end, capital asset activity a net impact of $60 million of current year additions expenditures for capital related items. Liability: $115 million increase related to bonds on High School and Elementary Schools and other post employment benefits.
  • Page 10:  Carve out of pension and OPEB activity; year ending position of $64 million, exclusive of fixed assets, capital assets, and related debt; showing a strong ending net position.
  • Page 24:  Budgeting accurately and spending dollars budgeted responsibly; see page 13 for additional tax collections received and expenditures were as budgeted.
  • Page 56:  Pending changes in accounting principles were discussed, as stated in the audit.
  • Page 69-70:  As required by law, a yearly audit of a major federal program was done; Title 1 was reviewed, it was determined that the District complied in all material respects.

Baker Tilly looked at the IT Network Strategies and met and discussed with District IT staff. Control objectives, purpose, and risks were determined and recommendations to address findings were suggested.  Mr. Brown noted that there were no issues that precipitated this review, but rather, looking for a second set of eyes to ensure a secure network for the District and best practices are being followed. Due to security issues, the handout will not be added to the agenda.

Executive Session was called by the Board Finance and Audit Committee to meet with Baker Tilly.  12:00 p.m.

Executive Session ended and meeting resumed at 12:35 p.m.  Baker Tilly representatives left the meeting at 12:35 p.m.

III.    Capital Expenses/Financing
Mr. Brown discussed the capital expenses and financing projections to prepare for the release of bid documents for the Memorial Field project.  The update includes capital project expenses of construction, design, and planning.

Highlights:

  • Page 1:  Capital Reserve Projection which includes debt service costs for elementary schools and estimated costs for Memorial Field ($10 million), other athletic fields and playgrounds ($10 million), and a future middle school ($60 million). Capital project funding needs beyond annual budget; Mount Nittany Middle School (MNMS) HVAC and North Building renovations. Estimated 2% rate of interest on contributions and interest earnings resulting from consistent funding of debt and capital expenses and earnings on cash reserves.  
  • Page 2:  Debt Service Schedule reflecting actual debt payments for second high school borrowing and elementary schools with estimated payments for remaining projects.
  • Pages 3-6:  Revenue, expense, and fund balance projections.
  • Pages 7-9:  Project costs summary for the Elementary, Memorial Field and High School.
  • Page 10:  Capital project budget projecting expenses for capital project for the next four years; fully funded with the exception of MNMS HVAC (unexpected expense) and North Building renovations being a $2 million deficient in 2018-19 and is being proposed to be funded through capital reserve funds ( see page 1).

The Capital Reserve Projection shows an ending fund balance in 2050 in excess of $14 million.  Capital projects beyond Park Forest Middle School (PFMS) have not been predicted; demographic analysis will give the detail analysis needed.  The plan is to commit the use of the deferred maintenance budget to maintain district facilities to avoid wholistic renovation projects currently being completed.  The Committee would like to see a more balanced approach in maintaining facilities; determine the life expectancy of buildings, plan for renovations in advance, and be mindful of maintaining buildings to eliminate large projects when possible, be prepared to have the needed capital upfront to cover anticipated costs (average $2 million annually), and have good analysis available to determine the District needs.

IV.       Budget Development 2019-2020 process
Mr. Brown presented the budget and discussed his handout.  Mr. Brown discussed the Capital Reserve Projection and highlighted a few areas. Memorial Field was discussed and is at a place where biding can begin (page 2); gray area projects where expenses are tight (page 3); Elementary construction costs (page 7); High School construction costs with a goal of not using the contingency funds (page 9); and deferred maintenance plan through 2022 (page 10).

Laurel Zydney left the meeting at 1:27 p.m.

V.       Amazon Business Account
Ms. Watson updated the Committee on the Business Amazon advantages.  It was noted that the approval process is the same process as any other District purchases.  Business Amazon would lower pricing on products, guarantee pricing for 7 days to allow for approvals, and give free two day shipping. Business Amazon would allow a better and more efficient process. The annual cost is about $1,300 a year, which is recouped with free shipping and lower overall costs on purchases.  The Committee agreed that it should be sent to the board for approval.

VI.       Future Meeting Agenda Items

Budget Development 2019-2020
Board Dashboard for Finance
Contracts/Purchases Policy

VII.         Public Comment
No public comment was given.

VIII.        Adjournment 
Mr. Fozard adjourned the Board Finance and Audit Committee meeting at 1:40 p.m.

 

Submitted by,

Nancy Reese
Acting Board Secretary